The Trump administration is exploring a new initiative to enhance housing affordability by proposing the introduction of portable mortgages, which would allow homeowners to carry their mortgage interest rate with them when they move. This idea was presented by Bill Pulte, the Director of the Federal Housing Finance Agency (FHFA), who indicated that the administration is actively reviewing this concept in light of ongoing challenges in the housing market.
With rising mortgage rates hovering between 6% and 7%, many homeowners who secured favorable rates below 4% are hesitant to sell their homes, fearing they would face significantly higher payments on new mortgages. By permitting the transfer of existing mortgage rates to a new property, the administration hopes to stimulate movement in the housing market, thereby increasing housing supply.
Currently, more than half of homeowners have locked in low mortgage rates, and the current stagnation in movement potentially constrains the housing market. A portable mortgage would theoretically allow individuals to sell a home financed at a low rate and retain that rate on a new property. For instance, a homeowner selling a property with a $200,000 balance on a 3% mortgage could transfer that balance to a new home, provided they cover any additional costs with cash or another smaller loan at current rates.
While the concept appears promising, experts say it raises concerns about potential repercussions in the market. Susan Wachter, a real estate professor at the Wharton School, warned that while the proposal could encourage homeowners to sell and increase supply, it might also lead to a rise in overall mortgage rates if fewer loans are paid off early.
The FHFA has not released specific details about how portable mortgages would operate, but it is evaluating multiple approaches to enhance affordability. There is speculation that legislative action may be required to clarify legal aspects of transferring mortgages between properties, given that mortgage agreements are typically tied to a specific address.
Additionally, the Trump administration is considering the introduction of 50-year mortgages, a proposal that has drawn criticism from housing experts who believe that while initial monthly savings could be small, the long-term cost implications could be significant. There is also ongoing discussion about the possibility of increasing the use of assumable loans, which allow buyers to take over a seller’s existing mortgage. However, such transactions often require substantial cash payments or additional loans, making them less appealing to first-time buyers.
Overall, as the administration navigates these proposals, the hope is that innovative approaches to mortgage lending will provide greater flexibility for homeowners and ultimately alleviate some of the housing supply issues currently facing the market.